Reform of Legal Aid in England and Wales: the Government Response Part 44
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This is Part 44 of the government response to Reform of Legal Aid in England and Wales. Please read the other parts for a full picture. Used under the terms of the Open Government Licence http://www.justice.gov.uk/downloads/consultations/legal-aid-reform-government-response.pdf.
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See: http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm101203/debtext/
101203-0003.htm
257 Reform of Legal Aid in England and Wales Government Response
The Government response
17. There would be no additional savings to the Government overall if the
legal aid fund was financed by a different part of the Government, but we
recognise that, in theory, the application of a ‘polluter pays’ approach
might ensure that greater account is taken of the costs to legal aid. On
the other hand, it might generate a much more risk-averse approach,
especially in relation to borderline cases, and have unintended
consequences which could drive additional costs. For example, local
authorities might be reluctant to intervene in cases of suspected abuse,
and prosecutors might be reluctant to pursue criminal prosecutions. Strict
application of the “polluter pays” principle would also call into question the
effective cost protection that the legal aid fund currently receives when
funding litigation. A significant proportion of cases funded by the LSC are
unsuccessful, and any requirement for the LSC to meet the costs of other
parties in unsuccessful cases would be a significant drain on the fund.
18. It is already the case that the courts can award costs in civil cases, and
last year, the legal aid fund recovered £170 million from opponents of
legally aided parties.
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19. The Government considers that inefficiencies in criminal justice
procedures are best addressed through better decision making, and by
introducing more efficient and streamlined processes. The CJS efficiency
programme aims to do this (see paragraph 16 section 2: the case for
reform). The MoJ is also already working with other government bodies to
help support improved decision making in civil matters, for example along
the lines of the joint work currently being carried out between Her
Majesty’s Courts and Tribunals Service and the DWP.
20. For these reasons, the Government has no plans to extend the polluter
pays principle further.
(v) Enforcement considered more thoroughly by Departments
21. The related proposal was that government consultation papers
introducing new rights or offences should set out the costs of
enforcement, as should explanatory notes to legislation. In addition the
NAO should scrutinise these predictions and require compensation to be
paid to the legal aid fund if appropriate.
The Government response
22. It is already a standard requirement that consultation proposals and
legislation are accompanied by published Impact Assessments (IAs).
These include the Justice Impact Test (JIT). JITs assess the costs on the
justice system, including on legal aid, of new government proposals.
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LSC data.
258 Reform of Legal Aid in England and Wales Government Response
Where these proposals result in a net cost to MoJ, then appropriate funds
are transferred to meet that cost.
23. The NAO already samples IAs and makes recommendations relating to
their quality.
(vi) Diversion of cases away from court and legal aid
24. It has been suggested that some types of case could be diverted away
from the court and to an Ombudsman service, where resolution of a
dispute might be possible without the involvement of legal services. This
might apply to debt, housing and social welfare cases.
25. It was also suggested that the use of mediation should be considered
carefully, and that mediation should not be applied in such a way as to
increase costs.
The Government response
26. One of the factors that was considered in deciding whether cases should
be removed from scope was the availability of alternative remedies, for
example a complaints procedure or an Ombudsman’s scheme.
27. The Government is already considering other court diversion proposals
as part of the public consultation on civil justice reform, where proposals
are currently subject to public consultation. The Government has also
considered (private law) family court diversion proposals although these
have now been subsumed within the current Family Justice Review
chaired by David Norgrove. This included reviewing the processes which
apply to mediation. The Family Justice Review interim report
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outlined
the benefits of mediation in supporting parties to resolve their disputes.
The need to make savings in the legal aid budget takes these initiatives
into account.
B. Proposals for alternative sources of funding
28. A number of proposals seek to reduce spending on legal aid by securing
alternative sources of funding. These include:
(i) Proposals for extra taxes and levies
29. Proposals included to place an increased tax on alcohol on the grounds
that much crime is alcohol-related, to place a levy on the financial
services industry to cover the legal aid costs of fraud cases as much
fraud takes place within that sector, and to place a levy on consumer
credit lenders to pay for debt advice.
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See footnote 6 above.
259 Reform of Legal Aid in England and Wales Government Response
The Government response
30. These proposals would mean creating new forms of tax and the
Government’s policy is to consider these on their own merits. Such
consideration should not give extra weight simply on the grounds that
new taxes could be hypothecated against specific areas of expenditure.
The Treasury’s Consolidated Budgeting Guidance sets out the criteria
used to aid decisions whether to hypothecate taxation against
expenditure. These are based on the general presumption that tax
revenue should not used to offset specific expenditure. They have been
devised in order to support decisions that hypothecated tax revenues are
agreed only on grounds of efficiency. Therefore hypothecation is not
normally agreed if it would: increase spending power; erode the ability of
the Government to raise tax efficiently and in the sectors of its choosing,
and erode its ability to allocate spending according to priorities.
31. In addition the relevant macroeconomic objective is to cut overall public
spending rather than to increase overall levels of taxation and the two are
not simply interchangeable. Tax policy is based on a variety of factors,
including whether the tax base is broad or narrow, how regressive or
progressive the tax might be, taxpayers’ ability to pay, and the
behavioural and other consequences of applying tax. In this instance the
proposals seem to be based on some notion of causality, although there
is no causal connection between alcohol and crime, between fraud and
financial services providers (where regulation already applies), or
between consumer credit providers and debt.
32. The Government is not therefore minded to consider recommendations to
introduce new taxes to offset the costs of legal aid. Instead legal aid
expenditure will continue to be funded primarily through general taxation.
(ii) Increased use of legal expenses insurance
33. It has been suggested that wider use of insurance in civil disputes would
help reduce legal aid costs. One suggestion was that there should be
legislation making legal expenses insurance a compulsory element of
consumer insurance policies (such as car, household or contents).
Compulsory legal insurance for company directors has also been
suggested.
The Government response
34. In developing proposals for the consultation paper, we explored with the
Association of British Insurers the scope for increasing the use of legal
insurance.
35. A number of insurers already provide cover for company directors and
company officials for the risk of prosecution. However, cover is only
provided until guilt has been established and, where that is the case, all
costs incurred have to be repaid. Moreover, the cover is only available
once alternatives, such as the availability of legal aid, have been
explored.
260 Reform of Legal Aid in England and Wales Government Response
36. We not consider that compulsory legal insurance should be explored
further at this stage. Dealing with those who do not take out the insurance
would be costly, and there would also be increased regulatory burdens. If
insurers were required to offer cover to everyone there may be issues of
cross-subsidisation and affordability, and the Government would need to
decide what should happen in relation to those who could not afford to
pay. Under ECHR the Government is obliged to provide legal aid in
certain circumstances and for this reason insurance could not be entirely
universal.
37. If legal services were funded by insurance premiums rather than by
general taxation the total level of spending and volume of activity might
differ. Some policy holders may seek to access legal aid more than now,
given that they have paid an explicit premium for this cover. If premiums
were set according to risk then they might be more regressive than
general taxation, and they might be more discriminatory from an equality
perspective in relation to key groups and also geographical areas. It is
unclear how well premium rates could be set to price risk accurately.
38. The nature and level of service might differ compared to now. It is unclear
whether access would be tighter or less consistent across different
groups. Legislation may be required here to address this. The efficiency
of resource allocation might also differ. The funds would be administered
by insurance companies rather than by the LSC, and administrative
efficiency and costs might differ.
39. More generally, insurers were not in favour of expanding the market in
before the event legal insurance. In their view, the premiums would not be
affordable for those currently eligible for legal aid.
40. For these reasons, the Government does not believe that the there is
scope in the short term to promote greater use of legal insurance.
(iii) Use restrained assets to fund cases
41. The Bar Council and Law Society have both proposed the use of
restrained assets to fund criminal defence. Currently, there is a prohibition
under the Proceeds of Crime Act 2002 that restrained assets should not
be used in a criminal defence, to ensure that assets that are alleged to be
the proceeds of crime are not dissipated.
The Government response
42. Assets recovered from the proceeds of crime are already applied to offset
the overall costs of criminal justice to the public purse. Using restrained
assets to pay for the costs of the legal defence would reduce the value of
assets available for confiscation under any subsequent recovery
proceedings. We therefore believe that they are unlikely to achieve any
significant overall savings to Government.
43. We are however considering a related proposition, under which the value
of restrained assets would be taken into consideration in the Crown Court
261 Reform of Legal Aid in England and Wales Government Response
means test. This would ensure that those assets are used to contribute to
the costs of the legal defence, although for the same reasons as set out
above, it is not expected to achieve significant savings in public spending.
For this reason, we do not consider it to be a realistic alternative to the
Governments plans for legal aid reform.
(iv) Widen and improve application of charges and loans
44. Proposals included applying the statutory charge to mediation (subject to
a 50% discount), better collection of the statutory charge by the LSC,
selling off statutory charge debt to the private sector, and applying the
statutory charge to a wider range of cases and to Legal Help. It was
suggested that defendants who elect trial on indictment should take out a
loan to pay the cost of representation.
The Government response
45. The private sector has displayed little appetite for buying statutory charge
debt at a price which would save the Government money, and there is no
strong body of evidence that the charge could be collected significantly
more successfully or efficiently. In essence, legal aid clients need to
satisfy financial eligibility criteria and as a result they do not tend to have
assets or income which are able to yield funds for the legal aid budget.
The Government’s reform of financial eligibility, to ensure that those who
can afford to pay for, or contribute towards the costs of legal aid are set
out at Annex E.
46. The administrative costs of operating a “student loan” arrangement would
be significant and savings are unlikely to be realised in the short term.
Unlike many students, who expect that their incomes might rise in the
near future upon graduation, the income of many legal aid clients might
remain flatter over time.
47. Similarly, those who elect for trial in the Crown Court are subject to the
Crown Court means test, and may have to pay contributions depending
on their assessed disposable income and capital.
(v) Interest on client accounts
48. The suggestion was that the legal aid fund should secure the interest
earned on solicitors’ client accounts.
The Government response
49. In the consultation paper, the Government sought views on establishing
an Interest on Client Trust Accounts (IOLTA) scheme. However, following
consultation, we have decided not to pursue this. See Annex J for full
details.
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